HEADLINE NEWS
Retail demand has picked up this Spring now that the Christmas period is history, with stability in interest rates helping the cause. It was perhaps unfortunate that the Bank of England held rates during the first quarter rather than a, widely expected small drop. There remains the cost-of-living concerns amongst the wider community, particularly with fixed rate mortgages continuing to come to an end for many households. Their new rates can be eye wateringly expensive which is stifling some consumer confidence.
As we head towards Easter, speaking to the trade, retail demand at the forecourt is still generally below par for the time of year being described as “better than average” but not “on fire”. There are of course many influencing factors, not least of all the continuing cost of living fears, world events and even in February, military leaders calling for the Government to consider ‘conscription’ to combat the ever-growing threat of Russian aggression!
As we know well, it does not take too much bad news for the used markets to be thrown from its axis but, with all of the glum news over much of the last 2 years, there are signs that the public are beginning to adopt the ‘let’s just get on with it’ attitude, spending money on that replacement car or van. The Manufacturers know this too and are offering increasingly tempting deals on new car and LCV stock, with BEV models being a prime example.
Some models are being offered new with low finance rates and up to 30% discount off list price which is attractive to the buyers. But where does that leave the used markets? Well, struggling actually, with used salespeople trying to capture every deal that they can. The net result of these new vehicle offerings is that used prices are having to drop in order to maintain sales.
This does in part explain why it is becoming so difficult at auction to achieve the CAP Guide pricing, because the trade know only too well that they have to buy keenly, to remain competitive on the used forecourts.
The first quarter also saw another influencing factor at auction, not seen since pre-Covid times. Volumes returning to market were extremely high this quarter, with some auction branches having to turn stock away because they were full.
This in turn is having an impact on collection agents, who are really struggling at the moment to pick up used vehicles and deliver them to the chosen sites. As a result, they are all quoting much longer lead times in collection, whilst they try to smooth out their workloads and ensure anything collected can actually be delivered!
Given all of these factors, the used markets are actually in a reasonable state for this period, with quite a few vehicles generally selling on their first outing. It is true to say that any vehicle offered in less than clean condition will suffer more than most, as will anything with an engine management light lit up. And any successful sale also depends quite heavily on the vendor being sensible with prices and not ‘expecting in excess of CAP’ performances.
The Guides are reflecting the downturn in pricing, with average reductions across the board of around 10% over the last 3 months. They continue to ‘realign the guides’, general speak for further reductions to come!
For the most part though, the early months of 2024 proved to be stable to good at both the retail and wholesale ends of the used markets with transactional prices consequently improving.
It would appear that the severe supply shortages experienced over the Covid period that decimated the new vehicle manufacturing industry has all but disappeared. However, some Manufacturers are suggesting that we are not out of the woods yet, with some very unpredictable world events potentially creating the same havoc all over again. The latest blockage of the Suez Canal will undoubtedly lead to more parts shortages which, together with the ongoing war in the Middle East is threatening to spread far wider economic disruption this year. Some Manufacturers have taken to removing some of the semiconductor dependent features of their vehicles, in an effort to keep production lines moving should the same shortages reoccur.
CARS
Pricing of stock has been interesting this period with some vendors selling stock at some margin behind the Book values. They have been able to do this because their ‘asset values’ are lower than the current Guide prices because the cars were bought pre-Covid in 2018 – 2020, when residual values were around 30% lower than today.
This alone is driving Guidebook prices down and by some margin too. BEV vehicles have dropped by around 40% since this time last year, with ICE cars not far behind at around 18% over the year, all of this for a 3-year-old 60k mile car. Of course, the BEV values have dropped because of the Manufacturer lead significant reductions in new car prices over the last 12 months, with more reductions predicted to come this year too in this sector.
Although stock has been selling in reasonable volumes this period there remains significant volumes of car stock at auctions around the country as we head into Easter. In addition, there is evidence of Manufacturers pre-registered stock returning to market as the normal end of year registration tactics continued. Supply, therefore, continues to outstrip demand for used cars and as a result of this there are very few cars making CAP Clean Book money, even if they are clean.
The issue of damage and warning lights continue to be the main barrier for any car reaching its maximum resale price. Glowing management lights on the dashboard is fast becoming a massive red flag for the trade, this now being the very first thing they look for as the car drives into the ring. Most traders will simply walk away from the car without bidding, they do not want to buy mechanical issues. Bodywork damage is being bought though; however, CAP Poor prices are the target here.
In summary the used car markets are certainly much better in early 2024 than they were last year with some renewed optimism amongst the trade, borne out by an upsurge in retail activity on the forecourts. Supply does outstrip demand by some margin though, requiring some hard rostrum management work to ensure cars are being sold and for the right money.
LCV’s
In common with most of last year, activity in the LCV markets has been much more buoyant this period than for cars. The sweet spot remains early Euro 6 vans that can sell for sub £10000, which as long as they are relatively clean will make Book money and beyond. The best performers are vans with less than 80k miles, Euro 6 and without any EML lights showing. In some cases, these vans are exceeding Book prices by over £1000, such is their demand by the trade.
Euro 6 vans of all types are of most interest now, with anything at Euro 5 or older usually selling for a lot less than Book. The only exception is if the vehicles are direct from Utility or Local Authority fleets, when they can still command prices in excess of Book. The much newer Euro 6 stock is still struggling to get to Book values for the most part, usually selling for closer to CAP Poor than Average.
The nearly new sector (up to 18 months old) LCV stock is currently being impacted by a surge in former daily rental stock flooding the markets. It appears that Manufacturers have begun offering deals to the Rental sector that are simply too good to miss, causing them to dispose of large swathes of their existing fleets. At least one of the larger rental organisations is selling their stock at prices significantly below CAP pricing, which is now impacting any other LCVs in the nearly new sector. Hopefully this is just a temporary blip with those new deals slowing down; this is the major factor affecting the nearly new LCV sector currently though.
Small CDV vans have probably suffered the most this period at sale time, purely down to the sheer volume now available to the trade to choose from. All make and models are available in volume, except perhaps for VW where Caddy vans are few and far between at the moment – possibly due to the fact the ‘blue fleet’ have not defleeted any volumes for some time now, dictating that any examples from other fleets will do well.
In the medium van sector, it is a similar story, with significant volumes to choose from of all make and models. However, one notable exception is the high roof medium van, such as the Transit Custom with a H2 roof. These remain fairly scarce and any that do present to auction sell very well, especially if they are low miles, clean and with all documentation. Oh, and without an engine management light on!
4×4 Pickup sales remained healthy this period as winter continued to pose problems around the country. This sector has improved immeasurably over recent years, since the demise of most Manufacturers from the markets. With only a few left now there are no crazy new deals available, being replaced instead by sensible trading. This helps the used markets especially, with volumes noticeably reduced in recent years.
Work models will always sell better than the lifestyle ones though, such as the older, high mileage Toyota HiLux seen below. Direct from Fleet with full history, this less than clean example went on to sell for 104% of the CAP value.
Damage is not helping vans sell this month, again because of the sheer quantity of stock to choose from. So nasty damage such as that seen below will simply be left behind, often not gaining any traction at auction at all. Many heavily damaged vans are now ‘traded’ after the sale.
As with the car markets currently, volumes of LCV’s coming back to auction are noticeably increased, especially from the daily rental sector which places extra pricing pressure on the nearly new stock. Sensible pricing will ensure that the markets remain buoyant though, as demand is there.
In summary there was not a lot wrong with the LCV markets during the winter period, they remain very buoyant with plenty of demand. We foresee that this will carry on up to Easter, when the holiday period will cause a slight interruption, but nothing to be concerned about, save for the pricing issues affecting nearly new vehicles.
TRUCKS AND TRAILERS
As with the other sectors of the markets, trucks and trailers were selling from the turn of the year, with some strong bidding on the less common types. As usual, anything specialist is proving very desirable, so dropsides and flats with loader cranes, beavertails, sweepers etc.
One notable exception throughout this period has been Tippers, which are beginning to struggle on the markets. This is down to volume with quite a few examples now being sent for disposal from the Utility sector, but also quite a few from the Rental area too. This unusual over supply has caused bidding to stall on tippers currently, even when fitted with the loader crane on 6×4 models. A distinct lack of Government projects has also caused a slowdown in work within the Construction industry, which is contributing to the slowing in demand.
This is but a temporary blip we believe, because of the volume coming from the Rental sector, once that dries up then prices and demand will return to normal.
As ever, the one sector that really continues to struggle is Tractor Units, where continued supply into the used markets is simply exacerbating the problems.
These ‘supermarket spec’ Mercedes Actros is typical of the breed stuck at auction currently, with day cabs and small diameter wheels. Used demand for this 6×2 Tractor is virtually non-existent so, with so many to choose from it is little wonder that this sector is stagnating. Only Units with lots of spec and sleeper cabs are stirring interest, as long as they are Euro 6.
The used Trailer market is also seeing some volumes coming back, from the pre-Christmas high demand period where some of the larger carriers hang onto older stock to see them through the busy period. Now, there is a steady volume of returns to the markets, with tri axle boxes and curtainsiders forming the majority. Prices are harder as a consequence, especially with the curtainsiders where choice is aplenty. As with the trucks though, anything unusual is selling and well.
PLANT AND EQUIPMENT
Following a quiet Christmas this sector has bounced back well, with some very busy sales reported this period. Export has become slightly more challenging, since the disruption to the Suez Canal shipping route out to the middle east. With shipping costs going through the roof the trade is seeking to recover some of this cost in the prices paid for stock, therefore the general stock is reducing in price. But for desirable kit the competition remains very strong, and the right prices paid.
The canny traders are buying grounds maintenance equipment now, cognisant to the fact that Spring is around the corner. Prices for all types of GM equipment will increase as they always do, as we pass Easter.
Any direct from Utility company stock remains popular, with Mini Diggers, Compressors, Trailers and the like all selling for good prices.
CLASSIC CARS
At a classic car sale this period, business was again busy but prices here are coming under pressure, owing to aforementioned issues with the economy and cost of living.
The auctioneers described the sale as generally ok but much more difficult than usual, with the volume of people actually bidding noticeably down. The type of cars being bought is also a surprise, with yet again cars from the 1980’s and 90’s being the most popular now. Look at the image above, spot the Vauxhall Astra and Nissan Primera – when did they become ‘classics?!! Bargain of the day had to be the Jaguar XJ V6, visible in the centre of the image – a 2004 registered car with history and 97,000 miles recorded, it sold for just under £2,000 after the sale.
The Next Few Months….
They key factor in determining where the markets are heading next is volume. Across all sectors we have seen some significant increases in returns to market from a variety of sources. As we have said, many auction sites are full and therefore are relying on selling stock to keep everything moving. This will inevitably place further pressure on pricing, certainly for the more mundane and damaged stock. Equal pressure will be applied to Vendors to ensure pricing is appropriate to get the stock sold, instead of turning auction centres into storage facilities!
We believe the markets will remain strong in terms of demand right up to and beyond Easter, thereafter ahead of the General Election more expected good news on the economy should strengthen demand even further.
XBG FLEET REMARKETING LIMITED
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